Labor cost
Effect of the World Economy as China commodity increases
Chinese has employed wide use of the mass production as a manufacturing strategy. This has lowered the price of commodities compared to other markets in the world. The Chinese product has been more competitive in the entire market and contributing largely to the economy of the country.
The exported products to the international market from china have a competitive advantage due to the low cost. In comparison to other markets the Chinese products such as DVD player and sweater among others, are cheap and hence attracting consumers. United States has experienced the effect of price increase hence translated to the economy at large.
In the case of the Chinese product increase, the effect to the United States economy as well as the entire world will have positive and negative results. The prices of the product manufactured in the United States will have the advantage of the relative price in the market making the level of importation from the china to go down. The overdependence on the china products will be reduced hence the products demands will below.
On the economic effects, the United States will experience low supply of the cheap products making the demand of the locally produced goods to increase. High demand will induce the market to increase the price making the local product cost higher. This would lead to low priced product through mass production and importation leading to the balance in the economy. The price of the locally produced product would be controlled by the local demand and supply within the United States economy.
On the balance of payment, the importation and the exportation of the United States manufactured goods in relation to the other countries will also be affected. The increase in price on the Chinese product will enhance the reduction international demand. This will give the United States produced product a chance to have high demand internationally. The United States will have the exportation than importation affecting the balance of payment.
Effect on disposable income
The disposable income being the amount of the household's income after the taxes deduction is much affected by the wage increase. The available money for spending and saving has a role of being the economy indicator of the overall household's activities. Increase in wage will result to an increase in the price of the commodities in the Chinese economy. This will be made possible by the increased demand of the products.
On the United States market, price increase would also lead to the cost- push inflation in the United States economy making the employees push and demand the rapid increase in wage. This in the intention of keeping up with the consumer prices level in the economy. This can finally result to the inflation to the economy at large. This will at long run make the entire economy of the United States be affected leading to the price hike.
Finally, the disposable income being the measure of the state of the individual in the relation to the economy is a sensitive to the commodity price. This would results to the economists to have a clear advice on the pricing setting strategy to cater the increased Chinese products price. This is the only mean that the United States would eliminate and prevent inflation from affecting the economy.
References
Bober, S. (2001). Alternative principles of economics. Armonk, N.Y: M.E. Sharpe.
Committee, U. S. (2000). Factors affecting the United States balance of payments. Washington: United States Government Printing Office.
